UK and EU step up preparations for a "no deal" Brexit

ByJo Gilbert

Published: 20 July, 2018

The Wine and Spirit Trade Association (WSTA) has voiced frustration over the plodding pace of Brexit negotiations as the EU published a paper on what businesses should do to prepare for a "no deal" or “hard Brexit” outcome.

The government is spending too much time on trying to agree a back-up plan rather than finalising a Brexit Withdrawal Agreement with the EU, representatives of the trade association have said.

The EU and the UK say they do not want negotiations on a trade deal to fall through, and that signing off the Withdrawal Agreement at October’s European Summit is still the goal.

However, Brexit talks are currently being pulled in two directions, leaving cross-border trade unresolved and Brexit D-Day on March 29 fast approaching.

“While we acknowledge the importance of contingency planning, the government must not lose sight of the most important objective - to secure a negotiated outcome from Brexit talks, including a transition period that gives businesses time to adjust to the new landscape,” WSTA chief executive Miles Beale, said.

This follows a European Commission paper issued this morning, instructing other EU states to prepare for a no-deal Brexit.

Withdrawing in March 2019 without a withdrawal agreement could result in border issues it said, including goods from the UK being subject to custom checks.

Without a deal, the UK effectively becomes a “third country” whose relations with the EU would be governed by international law, including the rules of the World Trade Organisation, which include import tariffs and which would carry significant economic costs.

In heavily regulated sectors, this would represent a “significant drawback compared to the current level of market integration”.

One example of this would be the UK’s economic relationship with Ireland, which was highlighted in the International Monetary Funds’s (IMF) latest report.

While a "soft Brexit" scenario - with the UK out of the customs union but retaining access to the single market and abiding by EU rules - "would imply almost zero cost for the EU as a whole", a no deal situation could seriously damage some EU countries, including Ireland's economy by up to 4%.

"The integration of the EU27 countries and the United Kingdom has strengthened over time, reflecting shared gains from the EU's single market," the IMF said.

"Conversely, the departure of the UK from the EU will inevitably represent a loss for both sides."

The issue of the Irish border continues to be the main sticking point in negotiations.

Both the UK and EU have both agreed there should be no hard border in Ireland after Brexit, but still cannot agree on how to achieve it.

The WSTA also called on the government to approve the backstop solution, which is “effectively an insurance policy to avoid a hard border between Northern Ireland and the Republic of Ireland if appropriate customs arrangements cannot be agreed by the EU and UK in time for the end of the transition period in December 2020,” according to the BBC.

If there is no backstop then there can be no Withdrawal Agreement and no transition period, which would result in possibly chaotic Brexit.

“It's encouraging that the new Secretary of State has committed to securing political agreement on the future relationship," said Beale. "However, as the EU has long stated, it cannot agree terms of the future relationship until Britain leaves the bloc. It is clear that the government should be placing all its emphasis on agreeing the backstop solution for Ireland as a matter of priority to avoid a no deal scenario.”